Kenya's Safaricom warns against more tax rises on money transfers

NAIROBI (Reuters) - Kenya's leading mobile phone operator Safaricom cautioned the government against further rises in excise duty on mobile money transfers, saying there was a risk new county-level administrations would add to the tax burden.

Chief Executive Bob Collymore said on Thursday further tax increases would put a service that has deepened financial inclusion, particularly in rural areas, beyond the reach of the poor.

The company said in May that a 10 percent tax imposed in late 2012 on transfers using its M-Pesa mobile service had forced it to absorb costs of 400 million shillings in the 2012/13 financial year to shield consumers from the full burden.

"Mobile money is still relatively new and Government should be wary of putting any additional tax burden on the customer, and in particular on the poor who rely on M-Pesa more than any other," Collymore told the company's annual general meeting.

Collymore said more than 28 shillings out of every 100 shillings charged to a telecoms customer went to the taxman, making Kenya's telecoms taxes amongst the highest in the world.

He said he worried that could rise yet higher if county governments, which were introduced this year, targeted the telecoms sector to raise revenues.

"This is an industrywide area. We have seen one county which attempted to charge fees for putting fibre (optic cable) on the ground," he said. "We are urging governors and local county governments not to take a short term approach because operators will inevitably deprioritise those counties."

The county governments have been allocated funds from the national budget to pay for projects but will have to meet shortfalls by raising their own revenues.

No government tax officials could immediately be reached to comment on prospects for increases in excise duty.

Safaricom, 40-percent owned by Britain's Vodafone, posted record pretax profits of 25.5 billion shillings last year. M-Pesa accounted for 18 percent of revenue, a share expected to climb to 20 percent within two years.

Mobile money transfers are used by workers in cities to send money to rural families and increasingly are also a means to pay utility bills or buy goods in shops such as groceries.

Collymore said Safaricom was still negotiating access to the 4G spectrum with the telecoms regulator.

Other telecoms operators in Kenya are a unit of India's Bharti Airtel, Essar Telecoms' Yu and Telkom Kenya, owned by France's Orange.